ACoS, ROAS, TACoS, and net ROAS, made simple
Shane first built this to help his wife, Dee. She runs brand and message for our clients, not the math, and the difference between ACoS, ROAS, TACoS, and net ROAS kept tripping her up. Once it clicked for her, she said to post it, because if these confuse her, they confuse a lot of sellers. Here is the plain version, with a short video and a calculator you can play with, so you always know if your ads are making money or losing it.
The voice is an AI voiceover. The research, the ideas, and the example are Shane’s. Questions? Contact us.
The one question all four numbers answer
Every one of these numbers answers the same simple thing. When you spend a dollar on ads, do you get more than a dollar back? Keep that in your head. Each number is just a different way to look at it.
What is ACoS?
ACoS stands for Advertising Cost of Sales. It is your ad spend divided by the sales those ads made. Spend 25 dollars, make 100 dollars from those ads, and your ACoS is 25 percent. That means 25 cents of every ad-driven dollar went to the ad. Lower is better. This is the number Amazon shows you by default.
What is ROAS, and is it just ACoS flipped?
ROAS stands for Return on Ad Spend. It is the same two numbers, flipped. Ad sales divided by ad spend. That same campaign is a 4.0 ROAS, which means 4 dollars come back for every 1 dollar you put in. Higher is better. And yes, ACoS and ROAS are exact opposites of the same fact. They are one fact wearing two outfits.
| ACoS | Same as ROAS | In plain words |
| 20% | 5.0 | 5 dollars back per 1 spent |
| 25% | 4.0 | 4 dollars back per 1 spent |
| 50% | 2.0 | 2 dollars back per 1 spent |
| 100% | 1.0 | spent 1 dollar to make 1 |
What is TACoS, and what it does not include
TACoS stands for Total Advertising Cost of Sales. Same ad spend on top, but now you divide by all of your sales, the ones from ads plus the ones shoppers make on their own. TACoS tells you how much your whole business leans on ads. The smart way to read it is over time. When ad spend stays steady but your free sales grow, TACoS falls, and that is one of the healthiest signs in your account.
What is net ROAS?
Regular ROAS counts the whole sale. But most of a sale is not yours to keep. Net ROAS counts only the profit that comes back for each ad dollar. If your margin is thin, a great looking ROAS can still lose money. Above 1.0 you are making money. At 1.0 you break even. Below 1.0 you are losing. Net ROAS is the honest one, because it is the only one that knows your costs.
The simple rule that tells you if an ad wins or loses
Here is the rule that ties it all together. Your break-even point is your profit margin. Work out your margin first, which is what is left after all your costs. If your ACoS is below your margin, you are winning. If it matches your margin, you break even. If it is above your margin, you are losing money on that sale.
| Sale price | $25.00 |
| Minus product cost and inbound shipping | $5.00 |
| Minus Amazon referral fee, about 15 percent | $3.75 |
| Minus FBA fulfillment | $5.00 |
| Minus storage and a little for returns | $1.25 |
| Profit before ads, your margin | $10.00, or 40% |
So for this product, break-even is a 40 percent ACoS. This is why the same ACoS can be great for one product and terrible for another. You can never judge an ACoS without knowing the margin behind it.
Six real examples, side by side
Each example has a different margin, so each has a different break-even. To compare them fairly, we line them up by net ROAS, where 1.0 is break-even for every product. Notice the two break-even examples land on the same spot even with different margins, and one loser had a healthy looking ROAS but a thin margin dragged it into the red.
40% margin, 60% ACoS
20% margin, 30% ACoS
40% margin, 40% ACoS
25% margin, 25% ACoS
50% margin, 40% ACoS
40% margin, 20% ACoS
Try it yourself
Drag the sliders. Watch ACoS, ROAS, TACoS, and net ROAS update, and watch the bar at the bottom tell you if you are winning or losing. There is no wrong answer here, so play with it.
These numbers are Shane’s lane, not just ads
Shane Patience runs Get Profit Smart. He holds a Master of Science in Technology Commercialization from the University of Texas at Austin (McCombs), is a Six Sigma Black Belt, and has 25+ years in manufacturing and supply chain, selling on Amazon since 2014. He reads Amazon from a margin and operations view, not just ads, which is exactly the lens these four numbers need.
Quick answers
Is ACoS the same as ROAS?
They are two sides of the same fact. ACoS is ad spend divided by ad sales, and ROAS is ad sales divided by ad spend. A 25 percent ACoS is a 4.0 ROAS. A lower ACoS and a higher ROAS both mean the same thing, your ads are working harder.
What is a good TACoS?
There is no single magic number, but lower is better, and a TACoS that falls over time is the real win. It means more of your sales come in on their own, so you lean on ads less. Always read it next to your margin, because TACoS does not include your costs.
Want us to check if your ads are actually profitable?
We will look at your ACoS, TACoS, and real margin, then show you where your money is going, even if you do not hire us.
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